About 50% of all expenses are with the purchase of fertilizers and pesticides, imported products whose prices are influenced by dollar value. For this reason, the cost of production is constantly increasing. “There isn’t the euphoria that was observed in previous seasons,” says Lucilio Alves, Center for Advanced Studies researcher in Applied Economics (Center for Advanced Studies in Applied Economics – CEPEA). “If the dollar was not at this level, agribusiness would not be growing. We would be in a critical situation, with negative revenue.”
In Mato Grosso, the largest state grain producer in Brazil, it is estimated an average cost of R$ 2.920,90 per hectare in the 2015/2016 season, while the state had an average of R$ 2.468,39 per hectare at harvest 2014/2015. This calculation was made by the Mato Grosso Institute of Agricultural Economics (Mato Grosso Institute of Agricultural Economics – IMEA), in the survey published on 28 September.
“This will be the most expensive soybean crop in history”, says Endrigo Dalcin, vice president of Aprosoja Mato Grosso (Brazilian Association of Mato Grosso Soybean Producers). According to Dalcin, the harvest 2014/2015 was planned at a cost tied to a dollar from R$ 2.30 and sold at a more favorable exchange rate. Now the cost is calculated on a dollar above R$ 3 and the future is uncertain. “It’s complicated to plan the harvest because the costs vary every week,” he says. Only in Mato Grosso, the estimate is an increase of approximately R$ 1 billion in spending on soybean crop. Thus, according to Dalcin, the farmer will do everything to contain expenditure. “Certainly, the producer will invest less in technology,” says the vice president. “He will save money on applying fertilizers and consequently will reap less.”
Another problem is that producers were not able to buy inputs in advance because of a political problem. The Agricultural and Livestock Plan 2015/2016, program launched by the Brazilian government that determined the provision of R $ 187.7 billion for public policy of agribusiness, had a late launch and introduced changes. New requirements for contracting loans and higher interest rates were created. “Credit is more expensive and there was a delay in the release of funds, then inevitably the soybean farmers also delayed the purchase of inputs,” said Dalcin. “In addition, many producers have negotiated the purchase of inputs in US dollars and now they had a bad surprise, because resources are not sufficient to pay the debt.”
In addition to the economic uncertainty, there is the climate issue. It is unknown how the El Niño phenomenon will impact production. “Soybean planting is already delayed by lack of rain,” said Dalcin. According to him, forecasts indicate a lower rainfall in October, irregularity of rainfall in November and the possibility of drought in January. “If all this is confirmed, we will produce less.”
Even with so many challenges, it is estimated an increase in the area planted with soybeans. In Mato Grosso, the area planted is expected to be 9.2 million of hectares (22.7 million acres), an increase of 2.06% or 185,000 hectares(456,950 acres) compared to 2014/2015 crop, according to the Imea. However, although the percentage is positive, the number is the lowest increase of area since the 2009/2010 harvest. According Dalcin, this growth of soybean production in the state is only due to the opening of new areas. “It’s something that was planned in advance. It means degraded pastures that are being converted to soybean production”, he said.
In the second largest state producer of soybeans, Paraná, the area devoted to soybeans can grow 2% to 5.2 million hectares (12.84 million acres), according to the first crop estimate of the state Department of Agriculture and Supply (State Secretariat of Agriculture and Supply – Seab). Lucilio Alves, researcher in the Center for Advanced Studies in Applied Economics (Center for Advanced Studies in Applied Economics – Cepea), believes that the acreage will grow only in case of replacement of corn crop harvest by soybean.
“We have much better prices for corn this year because of the appreciation of the dollar, but the cost of production also grew,” says Alves. “The problem is that we have a surplus of production and corn will lose ground to soy.” According to Alves, it is estimated that, at the close of the 2014/2015 harvest corn, there will be 14.7 million tons of production surplus of corn in Brazil. “We need to export good volumes in the coming months to dry the corn stocks.”
